What is it like to be the CEO of Google? A conversation with Eric Schmidt.

Eric Schmidt is currently the executive chairman of Alphabet Inc. In 2001, Eric was brought in to be CEO of Google when the nascent company had just 150 people and had just closed $25M . Prior to Google (1997–2001), Eric was the CEO of the declining company Novell (stock fell $40/share to $7/share during his term). Prior to Novell (1983- 1997) Eric joined Sun Microsystems as the first software engineer and rose the ranks to be President of Sun Technology Enterprises.

Start with something small and incredible.

“Two people can go off and change the world. Every successful project I have worked on over the past 40 years, within Google, or outside, has started off with two people working on an idea together. Windows was started by one person, UNIX was 2 people, Java was started by 1 person, Gmail was started by 2 people, Android had a tiny team, Linux was started by 1 person, and I could go on and on.”— Eric Schmidt

Ask the right questions

Questions Eric asks himself:

What is going to happen in the next 5 years?

You’ll miss the next big opportunity if you aren’t diligently searching for what it might be.

What causes you not to make decisions quickly?

Eric explained how most of the regrets executives have result from not making critical decisions sooner — firing someone sooner, killing a failing project sooner, moving into a new market earlier, hiring someone sooner.

Why does the Four Seasons rent the building? Why does McDonald’s franchise?

Eric highlighted the importance of capital and how preserving capital defines how a business operates. The Four Seasons rents the building because it is more capital efficient to do so. They wouldn’t be able to expand to as many locations if they chose to own all their sites. McDonald’s franchises for the same reason. They want more stores, and have to sacrifice some profit to the franchisee in order to be able to operate more locations.

Role of the CEO when a company is scaling?

Manage the chaos

Eric’s key role was hiring for all the executive functions. He was responsible for building the organization around the product.

Eric discussed how to “systematically hire better people”. 1/3 of his book “How Google Works”, is about recruiting the right people. He felt that it is best to “sell the dream” and either someone gets it or they don’t. Either they are on the boat, or they are off the boat, but it doesn’t make sense to try and convince someone on the vision. It has to resonate with them personally. If you spend hours convincing them on the front end, they will need more convincing later down the line in the trenches. Finding true believers saves time long term.

He admitted that their early hiring suffered from hidden bias against women. Google gave every employee a score of between 1 and 5 after a successful interview. A year later they looked at how the employee actually performed, and compared it to their prediction out of the interview. What they found out was that is if the employee was a woman, the score was inversely correlated with performance. It was the most extreme evidence of bias against female candidates. After learning this, Google changed the entire way in which they recruited for female candidates and managed to correct the hidden bias.

“It is tempting to believe you have a product that works before it works. This is an error especially made by non-technical people.” — Eric Schmidt

It doesn’t make sense to scale something that isn’t fully baked. There is a right time and place to put on the gas, and that is when what you are building “just barely works”. The first iPhone didn’t have any apps, but it “just barely worked”.

“All success starts from doing one thing really well.” — Eric Schmidt

Blitzscaling (CS183C) is a class at Stanford about how to navigate the challenges of rapidly “scaling” a business. The class is a lecture series taught by Reid Hoffman (cofounder of LinkedIn, Partner at Greylock), John Lilly (former CEO of Mozilla, Partner at Greylock), Chris Yeh (start up investor/advisor), and Allen Blue (cofounder of LinkedIn). All four studied at Stanford.